Trading Forex is No More Dangerous than Trading in Futures

The risks of trading in foreign exchange is a trending topic in the media where there are pundits stating that risk taking is one of the many features of the forex market.

Apart from this, there have also been statements about the savings accounts getting crashed and damaging trading decisions taken because of extreme leverage. Although, this opinion is not universal, it is one sided.

Investors have started using riskier strategies, since the emergence of financial markets. Also, many retail and institutional participants have good contacts and the levels of risk here in the retail sector are very high.

Risk Taking is not Free

They say that risk works in two ways; it can either make you a big winner, or leave you with nothing.

In case of bigger risks, there are bigger chances of winning and hence, chances of losing also increase.

In fact, Interactive Brokers is one of the big brokers who suffered huge losses during the Swiss Franc crisis. They explained to the media that the major reason for the losses was in the futures sector.

On asking about the ways in which risks for customers and brokers can be reduced; the company stated that financial markets will always be full of risks until they are influenced by authorities with the capability to alter the prices.

New Role of the Forex Broker

Klaus Ikast, the Head of Analysis of NetDania says that, “Comparisons done by the media between a casino and the forex market are not so different from reality. The reason for this is that some brokers operate their trading industry like a casino, and giving an impression to the customers that making money is easy, is the biggest scam in the forex industry.”

He further went on to say, “If operated correctly, forex market is not even a bit similar to a casino. What matters is the focus and understanding that the total market turnover of the retail business is only about 6%.”

The internet claims easy and huge returns by many trading websites. Trading this way has become very handy for the retail investors, but not much easier.

Klaus Ikast explains this by stating, “A trader requires good skills and knowledge for an effective forex trading. The outcomes of profit or loss cannot be controlled, but they can be managed by the investor by calculating the risk and reward ratios, position sizing and money management. This can control the financial influence of the trades too.”

Mr. Ikast advices on the forex retail trade by saying that, “If you are not well experienced with the trading yet, the leverage should be between 1:1 and 1:3. This should be the approximate estimation of ratios.”

It is said that there will never be a safe and fine market for retail traders, because there will always be traders who will be ready to take more risks even after what they have been told before.

Regulators do ensure a rational market place for traders, but at the end it totally depends on the traders and how much risk they should be taking.

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